For most people of working age in the UK, the pension or pensions they contribute through their workplace are the key to a comfortable retirement later in life. Thanks to the auto enrolment rules introduced over the last 10 years, practically every employer must pay a percentage of your salary into your pension pot, providing you as the employee does the same.

Whilst every employer can interpret the rules slightly different, there are minimum requirements in place to ensure that even the stingiest employer must adhere to.

What are the minimum levels?

Since April 2019 all employers have to pay at least 3% of your qualifying earnings (£6,240 to £50,000 for 2020/21 tax year) providing, you pay in 4%. As you receive tax relief on the contributions, you end up with the equivalent to 8% of your qualifying earnings going into a pension pot.

On a £20,000 salary this equates to £1,100 a year invested for only £550 of your money.

A lot of employers will offer better than this, for example, they will pay you a percentage of your pensionable pay (usually your salary before bonuses and overtime). In this scenario, a £20,000 salary could result in £1,600 a year going into your pension for only £800 of your money. There are some criteria, that mean it could be less than this. If you check with your HR department they will be able to tell you what criteria they apply.

Am I eligible?

Whilst most people in the UK are eligible, there are some eligibility criteria:

• You have to be at least 22 years old and younger than the state pension age
• Estimated to earn at least £10,000 pa
• Working in the UK

Opting out

It almost always makes sense to stay in an auto enrolment scheme as you will be receiving money from your employer that wouldn’t otherwise receive. Free Money!

However, you can choose to opt out if you want to. Pension Advisory Service recommend you call them to discuss it if you are thinking about doing it.

Increasing contributions

The most obvious way of maximising your workplace pension is by increasing the contributions you put in. By increasing the amount, you put in, you will be reducing the amount of Income Tax and Employees National Insurance you pay

Employer Matching

Many employers will pay more than the minimum requirements to ensure that they can attract and retain better employees for longer. Some will pay a fixed amount; however, others will match your pension contributions up to a certain level.

For example, if you put in 10% of your earnings, they will match it. This is a great way of building up a pot twice as fast.

Salary Sacrifice

When you are paid a salary by your employer, you must pay Income Tax and Employees National Insurance on this amount. On top of this, your employer, also must pay Employers National Insurance.

Above a certain limit, this equates to £138 per £1000 in salary. When you utilise Salary Sacrifice in a workplace, some employers will put the additional Employers National Insurance you have saved them, into your pension pot instead.

Reviewing what funds you are invested in

Most workplace pensions will put you into a default fund that often has medium levels of risk and reduces in risk as you get closer to retirement. For many people, these are okay, but younger people can generally afford to take higher risks and for many people it is a mistake to reduce risk before retirement. I’ll explain more about this another time.

However, most pension providers will allow you to switch into alternative funds with the same provider that are more suitable for your needs.

Starting Sooner

Although your employer is obliged to pay into a pension scheme, they don’t have to do it as soon as you join. However, it often makes sense to ask them when you will be enrolled and whether it can be done sooner. Ultimately it will result in more money for you, so it is worth asking.

When you get a pay rise, put as much as possible into the pension.

The title for this one says it all. When you get a pay rise, you should try and put a proportion, for example 50% into your pension. You hopefully had enough money before the pay rise to live, so rather than getting into the vicious cycle of Salary Creep, instead you should look to put more money into your pension.

The aim with all of this, is to build your pension pot as big as possible, as quick as possible and your higher earnings will accelerate this.

Understanding what your company offer

For most people of working age in the UK, the pension or pensions they contribute through their workplace are the key to a comfortable retirement later in life. Thanks to the auto enrolment rules introduced over the last 10 years, practically every employer must pay a percentage of your salary into your pension pot, providing you as the employee does the same.

Whilst every employer can interpret the rules slightly different, there are minimum requirements in place to ensure that even the stingiest employer must adhere to.

What are the minimum levels?

Since April 2019 all employers have to pay at least 3% of your qualifying earnings (£6,240 to £50,000 for 2020/21 tax year) providing, you pay in 4%. As you receive tax relief on the contributions, you end up with the equivalent to 8% of your qualifying earnings going into a pension pot.

On a £20,000 salary this equates to £1,100 a year invested for only £550 of your money.

A lot of employers will offer better than this, for example, they will pay you a percentage of your pensionable pay (usually your salary before bonuses and overtime). In this scenario, a £20,000 salary could result in £1,600 a year going into your pension for only £800 of your money. There are some criteria, that mean it could be less than this. If you check with your HR department they will be able to tell you what criteria they apply.

Am I eligible?

Whilst most people in the UK are eligible, there are some eligibility criteria:

• You have to be at least 22 years old and younger than the state pension age
• Estimated to earn at least £10,000 pa
• Working in the UK

Opting out

It almost always makes sense to stay in an auto enrolment scheme as you will be receiving money from your employer that wouldn’t otherwise receive. Free Money!

However, you can choose to opt out if you want to. Pension Advisory Service recommend you call them to discuss it if you are thinking about doing it.

Increasing contributions

The most obvious way of maximising your workplace pension is by increasing the contributions you put in. By increasing the amount, you put in, you will be reducing the amount of Income Tax and Employees National Insurance you pay

Employer Matching

Many employers will pay more than the minimum requirements to ensure that they can attract and retain better employees for longer. Some will pay a fixed amount; however, others will match your pension contributions up to a certain level.

For example, if you put in 10% of your earnings, they will match it. This is a great way of building up a pot twice as fast.

Salary Sacrifice

When you are paid a salary by your employer, you must pay Income Tax and Employees National Insurance on this amount. On top of this, your employer, also must pay Employers National Insurance.

Above a certain limit, this equates to £138 per £1000 in salary. When you utilise Salary Sacrifice in a workplace, some employers will put the additional Employers National Insurance you have saved them, into your pension pot instead.

Reviewing what funds you are invested in

Most workplace pensions will put you into a default fund that often has medium levels of risk and reduces in risk as you get closer to retirement. For many people, these are okay, but younger people can generally afford to take higher risks and for many people it is a mistake to reduce risk before retirement. I’ll explain more about this another time.

However, most pension providers will allow you to switch into alternative funds with the same provider that are more suitable for your needs.

Starting Sooner

Although your employer is obliged to pay into a pension scheme, they don’t have to do it as soon as you join. However, it often makes sense to ask them when you will be enrolled and whether it can be done sooner. Ultimately it will result in more money for you, so it is worth asking.

When you get a pay rise, put as much as possible into the pension.

The title for this one says it all. When you get a pay rise, you should try and put a proportion, for example 50% into your pension. You hopefully had enough money before the pay rise to live, so rather than getting into the vicious cycle of Salary Creep, instead you should look to put more money into your pension.

The aim with all of this, is to build your pension pot as big as possible, as quick as possible and your higher earnings will accelerate this.

Understanding what your company offer

One of the keyways to maximise your contributions is by simply understanding more about what your company offer.

Here are the key questions you should ask:

• How much do I need to put into the pension to be eligible for auto enrolment under this scheme?
• What criteria do you use when calculating how much you put into my pension? Is it on my total earnings or qualifying earnings?
• If I am a higher rate taxpayer, is there a more efficient way for me to contribute
• Can you show me projections for my pay if I increase my contribution to X%?
• If I utilise Salary Sacrifice, will the Employers National Insurance I save the company be put into my pension?
• Who is my pension provider?
• I’ve just started with you as my employer, can I start the pension straight away?